Get Help With Social Security
If you are planning to file for Social Security, and want to make sure you get all the benefits you deserve, you need to realize this is not a DIY project. There are thousands of possible filling combinations and nuanced rules that make each situation different and in most cases, you only get one chance to make a good decision.
Theres no way around ityou need to get professional help before you file. You can get started with a free 15-minute consultation from my team of Registered Social Security Analysts. Theyll listen to your unique situation and let you know how a strategic plan can cut through all the complexity and give you clear direction on your filing strategy. Schedule your call today!
When Is It Worthwhile To Continue Working While On Social Security For Higher Benefits
In the end, whether or how beneficial it is to continue to work while on Social Security in order to generate higher Social Security benefits in the future depends heavily on two factors: what income replacement tier the Social Security recipient will be in and what the existing earnings history already was . Similar to the consequences of retiring early , the consequences vary depending on where the individual is in the AIME calculation.
How Do I Qualify For Social Security Retirement Benefits
When you work and pay taxes, you earn credits toward Social Security retirement benefits. These credits are based on your annual earnings you can accrue a maximum of four credits per year. Once youve acquired 40 credits , youre fully insured and eligible to receive retirement benefits.
Your paychecks will withhold Federal Insurance Contributions Act tax until youve earned up to the taxable earnings base for the year.
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Check In With Your Accountant Or Financial Advisor
I always think it’s best to run the numbers by your accountant or other financial advisor. It’s great to be able to continue to work for many reasons. In fact, the Bureau of Labor Statistics projects the biggest annual increase in the labor force through 2024 will be in the 65 to 75 age group. But make sure you know what continuing to work at this point in life means in terms of your overall financial situation.
Will My Benefit Amount Be The Same For The Rest Of My Life When I Start Receiving Benefits
Your benefit amount will not stay the same. Generally, the benefit amount increases each year and protects beneficiaries against inflation. Social Security provides an annual cost-of-living increase that is based on the consumer price index. The 2000 increase for beneficiaries was 2.4 percent. The 2001 increase will be known in October.
There is another way that your benefit might increase. When you work, you pay Social Security taxes. And because you pay these taxes, Social Security recalculates your benefits to take into account your extra earnings. If the worker`s earnings for the year are higher than the earnings that were used in the original benefit computation, Social Security substitutes the new year of earnings. The higher your earnings, the more your recalculated benefit might be.
The amount that your benefit will increase cannot be told because each case is different. Your lifetime earnings are used to recalculate your benefit. You do not need to take any special action. A recalculation of your benefits will be done automatically in the year following the close of the year in which you worked. Most recalculations are usually complete by September of the following year . If you are entitled to a higher benefit, it is retroactive to January of the year after the year when you had the additional earnings.
Are You Eligible For Social Security
To be eligible for Social Security benefits, you must earn at least 40 credits over your working career. How those credits are calculated is complex, but you will likely qualify if you have worked for at least 10 years.
You may be entitled to a spousal benefit because of your partner’s work history. If your spouse, ex-spouse, or deceased spouse has earned 40 credits, you may qualify. The Social Security Administration provides more info about this option.
But your work history is not only used as part of the qualification criteria it is also used to figure out the amount of your payment. In calculating your monthly retirement benefit, the SSA considers your highest-earning 35 years of work history. If you worked for less than 35 years, the SSA will use zero for some years.
The higher your earnings over those 35 years, the greater your contribution to the program through FICA taxes, and the higher your benefit will be.
The same threshold applies to both your earnings and your benefits. This amount is $142,800 in 2021, and it will raise to $147,000 for the 2022 tax year.
Make The Most Of Your Social Security Benefits
Guidance on when to claim benefits based on your personal needs.
Guidance on when to claim benefits based on your personal needs.
Social Security represents the single largest source of income for the majority of older Americans, accounting for 50% or more of total retirement income for at least half of all married couples and more than two-thirds of unmarried individuals.
Social Security benefits represent one of the few sources of guaranteed income that retirees can count on for the rest of their lives. You can generally claim Social Security anytime between age 62 and 70, but the longer you wait to start benefits, the bigger your monthly benefits will be for the rest of your life.
While there has been a growing appreciation of the value of maximizing Social Security benefits in recent years by delaying benefits, the coronavirus pandemic and its devastating impact on the economy has prompted some Americans to rethink their previously planned Social Security claiming strategy to meet immediate income needs. The following article explains:
- basic rules for claiming Social Security benefits
- consequences of claiming reduced benefits early
- possible remedies for reversing those claiming decisions in the future
- and the value of delaying benefits for those who can afford to wait.
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Does Working Past Age 70 Affect Your Social Security Benefits
I’m turning 70 and about to start collecting Social Security even though I’m still working and intend to keep working for a couple more years. Since I’m past full retirement age, will I continue to pay Social Security taxes? Also, will continuing to work affect my monthly benefit?
First, congratulations on waiting until 70 to collect your Social Security benefits. By doing so, you maximized your monthly payout. That’s a smart move for many folks!
But while Uncle Sam gives you a bonus for waiting to collect Social Security benefits, he doesn’t give you a dispensation from paying Social Security taxes. As long as you have earned income , you’re required to pay Social Security taxes on up to the annual payroll limitation$147,000 in 2022. So, yes, if you continue to work, you’ll continue to pay into Social Security and other payroll taxes.
Fortunately for you, since you’re past your full retirement age , there’s no benefit reduction based on income. You’re entitled to full benefits no matter your income level. However, earned income may impact your benefit if you take Social Security before your FRA.
Whether or not your continued income has a positive effect on the amount of your monthly Social Security benefit depends on how much money you made in the past and how much you’re making now. Here’s why.
Claiming Social Security Benefits At Age 70
If you are about to turn 70, congratulations on reaching a big milestone. And if you also have delayed claiming Social Security retirement benefits up till now, you are joining a select group — only 6.5 percent of Social Security recipients put off collecting their benefits until they reach three score and ten, the age at which they can collect the maximum benefit. If you are about to join this elite group of septuagenarian claimers, its important to know when and how to claim.
The decision of how long to wait to claim Social Security benefits depends on a number of factors, including other income sources in retirement and projected longevity. But Social Security experts advise waiting as long as possible to start collecting benefits, up to age 70. This is because if you delay taking retirement beyond your full retirement age , you amass delayed retirement credits that increase your benefit by 8 percent for every year that you wait, over and above annual inflation adjustments. Your checks will be about 76 percent more than had you claimed at age 62, the earliest you can file. Its tough to find a better and more reliable investment than that.
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Dont Wait Any Longer
What If Youre Still Working?
For an article in The New York Times on determining the optimal time to claim Social Security benefits and ways to maximize benefits, .
For the SSA’s Retirement Benefits page, .
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Receiving Benefits While Working
You can work while you receive Social Security retirement or survivors benefits. When you do, it could mean a higher benefit for you and your family.
Each year, we review the records of all Social Security beneficiaries who have wages reported for the previous year. If your latest year of earnings is one of your highest years, we recalculate your benefit and pay you any increase you are due. The increase is retroactive to January of the year after you earned the money.
Full Retirement Age Continues To Rise
The absolute earliest that you can start claiming Social Security retirement benefits is age 62. However, claiming before your full retirement age will result in a permanently reduced payout.
Under current law, the retirement age for Social Security purposes is set to increase by two months each year until it hits 67. If you turned 62 in 2021, then your full retirement age is 66 and 10 months. Unless the law changes, anyone born in 1960 or later will not reach full retirement age until they are 67.
If you delay collecting Social Security past your full retirement age, then you can collect more than your full, or normal, payout. In fact, if you put off claiming until age 70, then you will receive an annual payout up to 32% higher than if you started receiving benefits at full retirement.
After age 70, there is no further incentive for delaying: Your monthly benefit stops increasing, with or without put-offs.
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You Get To Keep The Bigger Benefit If Your Spouse Dies
If both spouses in a marriage are receiving Social Security benefits, the smaller benefit goes away when one person dies. It doesnt matter who dies first the surviving spouse will begin receiving the larger of the two benefits.
That is why couples should focus on increasing the higher benefit, said Jeremy Keil, a retirement-focused financial planner with Keil Financial Partners and host of the Retirement Revealed blog and podcast. Its the one that will stay around longest and be there to help the widow.
When Will A Recomputation Become Effective
In most cases, benefit recomputations are effective January of the year following the year the earnings were earned. For example, earnings for 2021 will be included in a recomputation effective January 2022. Because of the lag time this can lead to retroactive payments, and Ill address that next but first lets cover the two exceptions to how a recomputation becomes effective.
The first exception is if you die. In that case, the survivors benefit paid to your beneficiaries will be effective in the month of death. For example, if you are still working and you die in June, your survivors wont have to wait until the following January for the earnings to increase the benefit. That benefit increase will become effective in the month you die.
Another exception is if you become entitled to a pension from a job where you did not pay Social Security taxes. In that case your benefit would be recomputed effective with the month you became entitled to that pension.
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Do You Know What Affects Your Social Security Benefit Amount
Social Security was never intended to be a retirees sole source of retirement income. Still, it will likely provide thousands even hundreds of thousands of dollars over the course of your retirement years. Even if you realize its importance, though, you may be planning for retirement without fully knowing what to expect from your Social Security benefit. There are several factors that will impact the amount you can expect to receive .
Earnings and the primary insurance amount Your benefit amount is primarily determined by your earnings. This may sound straightforward, but the Social Security Administration considers the 35 highest-earning years, adjusts them for inflation, and applies a complex formula to arrive at your primary insurance amount. This is the benefit you can plan to receive at full retirement age , which will fall between ages 66 and 67 depending on your birth year. Your benefit cannot exceed the maximum amount .
However, even after claiming benefits, you can boost your benefit amount by working, if your current earnings are at least high enough to replace the lowest earnings number used in the PIA calculation.
Inflation adjustmentsThe benefit amount, once claimed, is permanent in most cases. There is nothing more you can do to increase the benefit at that point, with a few exceptions. However, all benefits are indexed annually for inflation. In 2021, the increase was 1.3 percent.
How Will My Retirement Benefits Be Taxed
Approximately one-third of people who collect Social Security benefits are required to pay income taxes on these benefits. Individuals with higher total incomes must include up to 85% of their benefits as income for federal income tax purposes, designated by special step-rate thresholds. However, the taxation thresholds for your benefits arent currently indexed for inflation.
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‘s 59% Cola Is The Largest Since 1982
Every October, the Social Security Administration announces its annual changes to the Social Security program for the coming year. Below is our summary of the Social Security changes that were announced in October 2021 and are set to take effect on Jan. 1, 2022.
Ask Larry: Will Social Security Recalculate My Benefits To Include My New Salary
Economic Security Planning, Inc.
Today’s column addresses questions about continuing income and benefit rates, requirements for spousal benefits, when widow’s benefits can become available, potential effects of low income years and reflections on a potential filing strategy. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.
Have Social Security questions of your own youd like answered? Ask Larry about Social Security here.
Will Social Security Recalculate My Benefits To Include My New Salary?
Hi Larry, I start ed taking my Social Security retirement benefits at full retirement age. But I recently started a new position with a salary increase. Will my Social Security benefits amount be reevaluated annually to include my new salary? Thanks, Tim
Hi Tim, Yes, your Social Security retirement benefit rate can be recomputed following any year in which you have Social Security covered earnings. Your earnings would have to be higher than those in one of your previous 35 highest wage-indexed earnings years in order to result in a benefit increase, however.
Social Security automatically recomputes benefit rates on an annual basis, but you may be able to speed up the process by submitting proof of your earnings and requesting a manual recomputation. Best, Larry
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What Is The Retirement Earnings Test
The Social Security earnings test applies to people who are earning an income and choose to collect benefits before FRA. For every dollar an individual makes above a certain income limit, the Social Security administration will withhold some of their benefits.
In other words, a working individual, who collects before FRA, will receive a reduced percentage of their benefits.
However, it’s important to remember that those withheld benefits are not lost forever. Workers will recoup those lost benefits once they hit FRA. This means that the benefits that the Social Security administration withheld from workers before FRA will be fully paid out to them later on.
Though the earnings test has undergone many legislative changes since 1935, it still remains in place.
While it’s commonly thought that the test was first passed to encourage older workers to leave the workforce in order to make room for younger workers during the Great Depression, historian Larry Dewitt writes in 1999 that “the RET is part of the Social Security Act for the basic reason that Social Security was designed as an insurance scheme, which seeks to compensate covered individuals who suffer a loss of income due to retirement.”
Maximum Taxable Earnings Rose To $147000
In 2021, employees were required to pay a 6.2% Social Security tax on income of up to $142,800. Any earnings above that amount were not subject to the tax. In 2022, the tax rate remained the same at 6.2% , but the income cap increased to$147,000.
The flip side is that as the taxable maximum income increases, so does the maximum amount of earnings used by the SSA to calculate retirement benefits. In 2021, the maximum monthly Social Security benefit for a worker retiring at full retirement age was $3,148. In 2022, the maximum benefit increases by $197 per month to $3,345.
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